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Argus has identified 10 Investment Themes for 2025. This week, we take a deep dive into Theme 10, Pharmaceuticals and Biotechnology. With the aging U.S. population, the use of medications and medical technology is rising. The number of medications dispensed increased about 60% from 2012 to 2022, according to Statista. With the aging Baby Boomers cohort and the increasing percentage of the population over the age of 65, the rate is expected to go up. Analysts estimate that nine out of 10 elderly adults take prescription medication and more than half take four or more prescriptions. While the elderly represent the majority of the prescription market, those under the age of 65 are also taking more medications than ever as treatments become available for chronic and rare diseases. Blockbuster drugs also contribute to the escalating use of prescriptions. The market for GLP-1 medications used for weight loss and diabetes reached $47 billion in 2024 and is projected to reach $150 billion by 2030, according to market research firm MarketsandMarkets. Similarly, the global Alzheimer's market was at $8 billion in 2024 and is expected to grow at a 5% compounded annually growth rate through 2032. Over the coming years, the industry will continue to face headwinds from patent expirations on key drugs. A growing number of Big Pharma companies have turned to AI for drug development to boost revenue streams. Medtech is another growth sector within Healthcare. Doctors increasingly are using robotics and sophisticated and evolving medical devices to enhance quality of life. This week's list is a collaboration from our Healthcare team. Here are some companies on the Argus BUY list that our analysts believe are poised to benefit.

Each month we take a close look at an aspect of sector investing. This month, we are examining growth and valuation. Investors hunting for stocks that reasonably balance long-term growth prospects and current value characteristics might want to look at companies in the Healthcare, Financial, Information Technology, and Communication Services sectors. These are among the industry groups that are currently selling for PEGY ratios -- (price/earnings)/(growth+yield) -- at or below the S&P 500's ratio of 2.0. To generate the PEGY ratios, we use the P/E ratio for each sector based on forward earnings for the numerator. For the denominator, we average the growth rates for the past five years along with two years of forward estimates, this in order to achieve a less-volatile earnings growth rate trend. We then add the current yield to approximate total return. As an example, the current S&P 500 P/E ratio is 22.5, the current yield is 1.2% and the historical growth rate is 10.0%. The formula is 22.5/(1.2+10.0) and equals 2.1. Sectors with favorable growth and valuation characteristics, in addition to the three listed above, also include Energy and Materials. Premium-valued sectors with low growth rates include the consumer groups. Based on our analysis of growth rates and valuations, along with other factors, we have established our current Over-Weight sectors as Communication Services, Financial, Healthcare, Information Technology, and Utilities. Our Under-Weight sectors are Consumer Staples and Materials. Our Market-Weight sectors are Consumer Discretionary, Energy, Industrial, and Real Estate.

Pfizer is a leading developer and manufacturer of pharmaceuticals and biotech drugs. Its products include oncology and immunology drugs, treatments for rare diseases, and vaccines.

Monday Tee Up: Powell in the House Fed Chairman Jerome Powell will be on Capitol Hill this week; key inflation data will be released; Wall Street will get a strong gauge of consumer spending via updated retail sales data; and earnings reports will continue to hit the tape at an impressive rate. Last week, the Dow Jones Industrial Average dropped 0.5%, the S&P 500 fell 0.2%, and the Nasdaq was off by 0.5%. Year to date, the DJIA is up 4%, the S&P is up 2%, and the Nasdaq is up 1%. Meanwhile, the status of tariffs, proposed changes in the structure of the federal government, inflation, jobs, and geopolitical developments all remain front-burner issues. Earnings reports this week include McDonald's and ON Semiconductor on Monday; Coca-Cola and BP on Tuesday; Cisco Systems and CVS Health on Wednesday; Applied Materials, Unilever, and Deere on Thursday; and Moderna on Friday. Some 308 of the S&P 500 companies have reported, and earnings so far have resulted in a strong 15% year-over-year growth rate. That compares to 9% last quarter. Consumer Discretionary, up 15%, and Financial, up 11%, are the best-performing sectors, while Industrials are the worst, down 3%, that according to Refinitiv. Argus forecasts 12% S&P 500 EPS growth for 2025 and 11% for 2026. On the economic calendar, key inflation data is due and Fed Chairman Jerome Powell testifies before Congress. On Monday, Mr. Powell will give his annual testimony on monetary policy to the Senate. On Wednesday, he visits the House of Representatives. Also on Wednesday, the Consumer Price Index is released. CPI was 2.9% in December on an annual basis and core CPI was 3.2%. Argus forecasts no change in CPI and we expect core CPI will tick down to 3.1%. For our Economic Call of the Week, Argus Chief Economist Chris Graja, CFA, offers the following. 'We normally try to highlight indicators that aren't widely followed or provide a different perspective on the economy, but this week it will be all about inflation, with consumer prices on Wednesday and producer prices on Thursday. One reason we are focusing on inflation over retail sales (due Friday) is that inflation expectations jumped in the University of Michigan's sentiment reading last Friday. One-year inflation expectations rose by a full point to 4.3% in February from 3.3% in January. The three-month average through December had been 2.8%. Retail sales will still be important. Our big concern is always the health of consumer spending. We expect the data will confirm that consumers are continuing their strong pace of spending, as unemployment is low and wages are growing. Wealthier consumers are in especially good shape and they count for a higher percentage of spending. However, we note that January of 2024 was the weakest month in 1Q24, and we would not be surprised or overly concerned if consumers take a bit of a pause.' Last week, mortgage rates dipped six basis points (bps), with the average 30-year fixed-rate mortgage now at 6.89%, according to FreddieMac. Gas prices fell two cents to an average of $3.08 per gallon for regular gas. The Atlanta Fed GDPNow indicator is forecasting for 1Q and calls for expansion of 2.9%. For 2025, the Argus GDP estimate is for 2.1% growth. The Cleveland Fed Inflation Nowcast is forecasting for February and is at 2.62%, which is lower than expectations for January. The next Fed rate decision is on March 19, with odds currently at 17% for a rate cut, according to the CME FedWatch rate tool. After that, the next meeting is in early May.